Lifelong Investing Helps Older Workers Weather Storm, Study Says

By Staff Report

Apr. 5, 2010

A lifetime of investing helped older workers’ retirement plan investments withstand the declines of the 2008-2009 market crisis, says a new analysis by Boston College’s Center for Retirement Research.

“As jarring as the financial collapse may have been for the Early Boomers, the market has actually treated them quite well in their lifetime,” says the CRR report, which defines this group as people who were 50 in 1999.

The authors compared Early Boomers using two benchmarks—lifetime returns on retirement assets and the investing results of what CRR calls Late Boomers (people who were 40 in 1999) and Generation Xers (people who were 30 in 1999), the report says.

Late Boomers, meanwhile, have “experienced a less favorable investment environment over their careers and will need extraordinary returns just to end up as well off as the Early Boomers are today,” says the report written by Alicia H. Munnell, the center’s director, and by Jean-Pierre Aubry, a research associate.

“Generation Xers, given their short careers, have faced the worst environment, but they have more time to catch up,” the report says.

To illustrate their research, the authors looked at annualized returns for three hypothetical workers starting all-equity investments in their 401(k) plans by age 30. The comparison assumes these investments amounted to 6 percent of salary each year and that employers made a matching contribution of 3 percent each year.

The researchers examined how these investments would have fared over three periods for each worker from age 30 to the market peak in October 2007; from age 30 to the market bottom in March 2009; and from age 30 to February 2010.

The Early Boomers had a 12.4 percent annualized return through the market-peak period, compared with 10.3 percent for the Late Boomers and 8 percent for the Generation Xers. The results for the market-trough period were 7.9 percent for Early Boomers, 3.1 percent for Late Boomers and -6.4 percent for Generation Xers. Through February 2010, Early Boomers had 9.2 percent versus 5.5 percent for Late Boomers and 0.3 percent for Generation Xers.

And when researchers ran the investment numbers using 50 percent equities and 50 percent bonds for each group, they came up with the same conclusions. During each period, the Early Boomers scored highest, Late Boomers were second and Generation Xers finished last.

Filed by Robert Steyer of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail


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